WESTON, C.J. - This is a reference made under Section 66(1) of the Indian Income-Tax Act by the Income-Tax Appellate Tribunal, Delhi Bench.
The matter concerns the assessment year 1944-45 of the partnership Messrs. Brij Mohan-Rameshwar Dass who were doing cloth business at Delhi. Notices under Sections 22(2) and 22(4) of the Income-tax Act had been served on the assessee but the assessee failed to comply with such notices. No returns were filed and no account books were produced. The Income-tax Officer then made his assessment under Section 23(4) as was open to him and he estimated the income of the assessee firm for the year under consideration at Rs. 65,000. In making this best judgment assessment he took into consideration the assessments made for two previous years on the basis of the assessees accounts showing incomes in each year approximately Rs. 35,000. He considered that non-submission of returns and withholding of accounts justified the presumption that income in the material year must have been much more than those of the two previous years. For failure to comply with the notices under Section 22(2) and 22(4) penalty was imposed upon the assessee.
The assessee filed three appeals to the Appellate Assistant Commissioner. One of these appeals was against the order of penalty. The second appeal was against an order under Section 27 holding that no good cause for non-submission of the returns and non-submission of accounts had been made out, and the third appeal was against the assessment itself. The Appellate Assistant Commissioner dismissed the appeal against the penalty and also the appeal against the order made under Section 27 of the Act. In respect of the appeal against the assessment itself the Appellate Assistant Commissioner seemed to think that there was no material on the record which justified the best judgment assessment of Rs. 65,000. He said he did not feel satisfied about it. He thought the matter required to be looked into further and he made an order of remand, which he was entitled to do under Section 31(2) of the Act, directing the Income-tax Officer to re-compute the income on the basis of further inquiry and he added the words 'as well as the appellants accounts'. The Income-tax Officer made some further inquiry and mainly, it appears, on the basis of the accounts then produced he made a further assessment of Rs. 37,072. When this report came back to the Appellate Assistant Commissioner another officer was holding that post and this officer seemed to consider that by his order of remand his predecessor had erred in permitting or directing the accounts of the assessee to be looked into by the Income-tax Officer. He seemed to hold that he was not bound by the action of his predecessor. In the course of his order he did say that he was unable to place any reliance upon the accounts which the assessee had then produced and he considered that the assessment based on these accounts therefore could not be supported. In the result he confirmed the order of assessment at Rs. 65,000 which had been originally made.
The assessee filed three appeals to the Appellate Tribunal against the three orders dismissing his three appeals to the Appellate Assistant Commissioner. In the appeal against the penalty order the quantum of penalty was reduced. The appeal relating to Section 27 of the Act was dismissed. The present reference arises from the appeal which arises under Section 23(4), and the Appellate Tribunal has reduced the assessment from Rs. 65,000 to 50,000.
In the course of the present appeal a question was propounded as to whether the Appellate Assistant Commissioner had jurisdiction by his order of remand to permit the Income-tax Officer to take into consideration when making his re-assessment the accounts of the assessee. It may be said that this question appears more of academic than practical interest in the present matter. But after a difference of opinion between the two Members of the Tribunal the final opinion expressed by the learned President of the Tribunal is that the Appellate Assistant Commissioner had no right to permit the account books to be looked at.
It is now possible to understand the reference which has been made to us in the following terms :-
'Whether, on the facts of this case, it was open either to the Appellate Assistant Commissioner or to the Tribunal to take cognizance of facts and circumstances which were not before the Income-tax Officer at the time the latter made the assessment to the best of his judgment in terms of Section 23(4) ?'
I think perhaps the question which really arises should be more clearly in these terms :-
'Whether in an order of remand made by an Appellate Assistant Commissioner under Section 31(2) of the Act it is open to the Appellate Assistant Commissioner t direct or permit the Income-tax Officer to take into consideration account books of the assessee which had not been produced before the Income-tax Officer at the time the first assessment was made ?'
It seems to me the answer to this question must be in the affirmative. There is nothing in Section 31(2) which limits the scope of the further inquiry ordered under clause (2). Further inquiry by its very nature implies that fresh evidence should be led, and the account books of the assessee undoubtedly are fresh evidence. For the Department reference has been made to the provisions of Order XLI, rule 27, of the Code of Civil Procedure. This provision has no application to the present matter, for it deals merely with the rights of parties to lead further evidence before an appellate Court and has nothing to do with the provisions for remand which are to be found in other rules of Order XLI. We are in no way concerned here to pronounce upon the weight, if any, which would be given to the account books which the assessee failed to produce in reply to the notice. The question before us may be very academic, but since it has been made we must give the answer. The answer in my opinion is that in law there is no bar to the Appellate Assistant Commissioner when making a remand order permitting or directing the Income-tax Officer to take into consideration account books of the assessee when making his re-assessment, and I would return the reference accordingly. I do not think we should make any orders as to costs in this matter.
HARNAM SINGH, J. - I agree.
Reference answered accordingly.